Wallet watchers: consumer spending under the spotlight in new report

BY Fraser Tennant

Providing businesses with deeper insights into consumer behaviour across the globe and pinpointing the drivers of choice that open and close the customer wallet is a new report released by KPMG.

In the inaugural ‘Me, My Life, My Wallet’ report, KPMG  analyses how the seismic influences of sociopolitical and economic shifts, accelerated mass adoption of new technologies and mobility are upending fundamental beliefs around what drives consumer behaviour.

The KPMG report also unveils a new customer engagement framework designed to help businesses understand the increasingly complex and multidimensional forces that influence decision making and preferences of today's and tomorrow's consumer. 

The framework is based on what KPMG calls the ‘Five Mys’ (which focus on five behavioural drivers – My Motivation, My Attention, My Connection, My Watch and My Wallet), Customer Wallet (fresh thinking on our changing relationship with money) and Generational Surfing (a new perspective on how those life event drifts can help businesses anticipate changing needs and preferences). The customer engagement framework goes deeper than just the analysis of data through a single lens.

From millennials to baby boomers, the framework helps businesses to assess the drivers of consumer decision making by looking at the multiple factors that influence people's everyday lives. Together, the three dimensions of the framework – behavioural, financial and demographic ─ help deliver a more comprehensive, 360-degree view of a consumer.

“Every day, new influences impact consumer motivation, behaviour and consumption and these forces are upending the conventional predictors of when, why and for what the customer wallet opens,” said Willy Kruh, global chair of KPMG's consumer and retail practice, and a partner with KPMG in Canada. “Transactional data, traditional market research and demographic profiles alone are proving inadequate to explain not just what customers are doing, but why.”

The report is based on a survey of 10,000 people across the US, UK, India and China,  using comprehensive, customer-focused research methodology.

Mr Kruh concluded: “It is time for an industry reset that re-orients us to understand what drives consumer engagement today. This calls for a new, intelligent, multi-dimensional model that uses predictive insights to help companies understand the customer journey and who their customers truly are.”

Report: Me, My Life, My Wallet

Time has come for Meredith

BY Richard Summerfield

After a number of failed attempts to complete a deal for the company, American media conglomerate Meredith Corporation has announced that it is to acquire Time Inc. in an all cash deal worth $2.8bn, including the assumption of debt and net of cash acquired.

Under the terms of the deal, Meredith will pay around $18.50 per Time share to acquire the company. The $18.50 per share price represents a 46 percent premium over Meredith’s closing price on 15 November 2017, the day prior to media reports about the transaction, and a 66 percent premium over the company’s 10-day volume weighted average trading price ending on that day.

Meredith had made a number of attempts to acquire Time Inc over the last four years but was unable to complete the deal, until now. Pending the customary closing conditions and regulatory approval, the transaction is expected to complete during the first quarter of 2018.

"We are creating a premier media company serving nearly 200 million American consumers across industry-leading digital, television, print, video, mobile, and social platforms positioned for growth," said Meredith chairman and chief executive Stephen M. Lacy. "We are adding the rich content-creation capabilities of some of the media industry’s strongest national brands to a powerful local television business that is generating record earnings, offering advertisers and marketers unparalleled reach to American adults. We are also creating a powerful digital media business with 170 million monthly unique visitors in the US and over 10 billion annual video views, enhancing Meredith’s leadership position in reaching millennials."

John Fahey, chairman of Time, said, "Time Inc.’s board of directors has unanimously determined that this all-cash transaction, and the immediate, certain value it provides, is in the best interests of the company and its shareholders. On behalf of the entire board, I thank Rich Battista for his strong and exemplary leadership. We also thank the management team and all Time Inc. employees, who together have made significant progress transforming one of the world’s most iconic and historically significant publishing companies into a leading multiplatform media enterprise."

The deal will be partly financed by a $650m investment by Koch Equity Development. Meredith will also be using $3.55bn in financing commitments obtained from a variety of lenders, the company said in a statement.

News: Meredith to buy U.S. publisher Time in Koch-backed deal

Global deal activity set to increase in 2018

BY Richard Summerfield

Merger and acquisition activity will increase in 2018 as global dealmakers recover their appetite for investments, according to Baker McKenzie’s 'Global Transactions Forecast 2018'.

As economic and political concerns subside, global M&A activity is expected to climb to around $3.2 trillion next year, with an increase in both M&A and IPO activity. The momentum created in the second half of 2017, as economic growth began to pick up in certain key markets, will roll over into 2018.

M&A activity in the consumer goods and finance industries will continue to generate the highest total deal values in 2018, the report suggests. The pharmaceutical and healthcare and technology and telecom sectors are also expected to rebound from a disappointing 2017 in which M&A activity is on course to slip to $2.5 trillion from $2.8 trillion last year.

“After a few soft patches in 2017 we have a more optimistic outlook for the global economy and dealmaking in 2018, as long as the brakes are not put any further on global free trade. We see an uplift in both M&A and IPO activity as dealmakers and investors gain greater confidence in the business prospects of acquisition targets and newly-listed businesses,” said Paul Rawlinson, global chair of Baker McKenzie. “However it’s not a done deal, with the threat of a Hard Brexit and a NAFTA collapse both still very real. Business will need to continue to make the case for liberal trade and investment frameworks.”

Global head of M&A at Baker McKenzie, Michael DeFranco, said, “2017 played out as we predicted and there have been a number of positive developments in the global economy that have led to the forecast for global M&A values in 2018 to be increased from our previous forecast of US$3 trillion to US$3.2 trillion. This would represent the 3rd highest yearly deal value since 2001 and the 2nd highest since the financial crisis in 2008.”

China's predicted GDP growth for 2018 has been revised from 5.9 to 6.2 percent.  The European GDP growth forecast has also been revised for 2018, up to 1.9 percent from 1.6 percent.

Beyond 2018, the report predicts that M&A values will drop to $2.9 trillion in 2019 and $2.4 trillion in 2020.

Report: Global Transactions Forecast 2018

Global FinTech funding totals $8.2bn in Q3 2017, reveals new report

BY Fraser Tennant

Investment in FinTech reached $8.2bn across 274 deals in Q3 2017, with venture capital (VC) funding strong and deals large, according to KPMG’s latest quarterly analysis of global trends.

In ‘Pulse of Fintech Q3 2017’, KPMG reveals that the US led global FinTech investment in Q3 2017, with $5bn deployed across 142 deals (VC funding increased to $3.3bn across 211 deals, up from $3.01bn in Q2). In Europe, FinTech deals accounted for $1.66bn of investment across 73 deals, while Asia saw $1.21bn invested across 41 deals (VC funding was particularly strong in Europe in Q3 at over $700m).

Additional Q3 2017 FinTech highlights include: (i) the median deal size for angel/seed stage deals at the end of Q3 2017 stood at $1.4m, up from $1m in 2016, while the median deal size for early stage rounds was also up to $5.5m from $5.1m in 2016; (ii) the median deal size of late stage deals was even year-over-year at $16m; (iii) while overall corporate VC funding has declined so far this year, the participation rate remains high (corporates have participated in 18 percent of all FinTech VC deals globally, year-to-date); and (iv) FinTech venture-backed exit activity skyrocketed in Q3 2017, almost tripling quarter-over-quarter from $270m to $940m. This reflects the second-best quarter on record for FinTech exits.

Furthermore, the top 10 global deals in Q3 2017 included six US companies. These were Intacct ($850m), CardConnect ($750m), Xactly ($564m), Merchants’ Choice Payments solutions ($470m), Access Point Financial ($350m) and Service Finance Company ($304m). The remaining four were Germany-based Concardis ($806m), UK-based Prodigy Finance ($240m), Canada-based TIO Networks ($238.9m) and China-based Dianrong ($220m).

“The level of corporate participation in FinTech VC investment deals in Europe can largely be attributed to a growing recognition by traditional financial institutions that digital transformation is critical,” said Anna Scally, a partner, head of technology and media and FinTech lead at KPMG. “Build or buy is always an important consideration. Many of these financial institutions have started to heavily invest in FinTech companies as a strategy to give them the direct access to the new technologies they need to compete."

Looking ahead, the KPMG report notes that the FinTech sector is expected to continue to evolve rapidly, with many companies, including both mature FinTechs and large e-commerce players, looking to diversify into adjacent services.

Report: Pulse of Fintech Q3 2017 - Global analysis of investment in fintech

UK SMEs resilient in Q3 2017 with fundraising plentiful

BY Fraser Tennant

Despite prevailing uncertainty in the macro-backdrop, the UK small and medium-sized enterprises (SME) sector is proving to be resilient having seen a strong Q3 2017, according to figures published this week.

In its ‘Growth Capital Update Q3 2017’ report, Kingston Smith reveals that 117 private companies raised £501.3m of growth funding in the third quarter – figures which accelerate the sector’s momentum and suggest 2017 will end up being a record year for growth equity capital fundraising in the UK SME sector.  

The firm also notes that last quarter’s figures bring the year-to-date total to £1.35bn raised by 330 companies, which suggests that 2017 will comfortably exceed 2015’s peak when 394 businesses raised £1.53bn (Kingston Smith’s analysis covers mid-market range transactions in which UK private companies have raised £1m to £15m of growth equity capital).

Underlining the appeal of the UK SMEs, two of the quarter’s top-three backers were international venture capitalists (VCs). The reason for the uptick in interest, according to Kingston Smith, is due to many of the UK’s growing SMEs being at an early stage in their development,  the global reputation that UK businesses have for being potential ‘world-beaters and the opportunities a weakened pound presents to international funders.  

Among the notable deals in Q3 2017 was the £15m investment made by L Catterton, a US private equity firm specialising in consumer brands, to acquire 27.9 percent of the Scottish craft beer brewer Innis & Gunn; Foresight Group’s £2.25m investment into Cinelab London, a postproduction service provider with expertise in film; and the £3.5m investment made by Business Growth Fund, one of the UK’s biggest investors in SMEs, into Filmore & Union, a chain of UK restaurants focusing on healthy eating.

In addition, the report states that approximately 65 percent of the funding in Q3 came from  institutions, many of which are international, including L Catterton (US), Creandum (Sweden) and Partech (Transatlantic).

“We are genuinely encouraged to see this dynamic part of the market grow,” said John Cowie, partner and head of growth capital at Kingston Smith. “While we understand the tremendous growth prospects these businesses have, it is very promising to see more international backers invest as a vote of confidence. The figures highlight the strength of this part of the UK economy.”

Report: Growth Capital Update Q3 2017 – UK SMEs set for record year of growth equity capital fundraising